Chesapeake raises 2015 output guidance: UpdateOREANDA-NEWS. Chesapeake Energy marginally raised its 2015 output guidance on the back of a strong performance in the first quarter and a reduction in drilling costs.

A recovery of about 35pc in oil prices since the near six-year lows touched last month, fueled by tensions in the Middle East and a sharp pullback in drilling activities in the US, is giving producers like Chesapeake and Occidental Petroleum confidence to raise their output guidance for the year. The higher target comes even as spending is expected to stay low due to a dorp in costs of services and supplies.

Chesapeake kept its total capital expenditure (capex) guidance unchanged at \$3.5bn-\$4bn for the year, but expects actual spending to be much lower as it lowers its rig count. The average rig count has dropped to 26 from 54 in the first quarter compared with 70 at the start of the year, the company said. The number is expected to fall to 14 during the third quarter, chief financial officer Nick Dell'Osso said in its earnings call.

"Current commodity prices are dictating to the industry that we must also be flexible with regard to our capital spending levels," Dell'Osso said. "We are already seeing dramatic reductions in our capital spending rate."

Capital expenditures in the first quarter rose to \$1.5bn versus \$1.4bn a year earlier but fell \$1.8bn from the fourth quarter. It expects drilling and completion capital to fall to \$200mn by June from about \$490mn in January.

Chesapeake expects output of about 640,000-650,000 b/d of oil equivalent (boe/d) in 2015, compared with an earlier expectation of 635,000-645,000 b/d given in March.

Output in the first quarter rose 14pc from a year earlier to 686,000 boe/d. Of that, average oil output rose 17pc to about 121,900 b/d. Natural gas output gained 12pc to 2.9 Bcf/d and natural gas liquids (NGL) output was up 19pc to 75,800 b/d.

Output in the Eagle Ford shale rose 7pc from a quarter earlier to 113,000 boe/d while drilling costs fell. The independent expects well completion costs to fall to \$5.5mn by the end of this year, which had already declined to \$5.9mn in the end of last year from \$6.9mn a year earlier.

For its acreage in the Haynesville and Bossier areas in northwest Louisiana, average output gained 4pc from a quarter earlier to 616mn cf/d.

For its Mississippian Lime area in Northern Oklahoma, output increased 11pc from a quarter earlier to 32,000 boe/d. The company expects completion costs in the region to fall to \$2.5mn per well this year, a further decline from the \$3mn achieved at the end of last year and \$3.5mn in 2013.

In the Utica shale acreage in eastern Ohio, output rose 10pc from the fourth quarter to 110,000 boe/d. The company expects well completion costs to rise to \$8.2mn in 2015 as it extends the drilling length to 7,900 feet with 41 fracs, up from \$7.2mn at the end of last year and \$6.7mn in 2013.

In the Marcellus area in northern Pennsylvania output increased 2pc from a quarter earlier to 832mn cf/d, and gained 10pc to 20,000 boe/d in the Powder River Basin in Wyoming.

Chesapeake posted a net loss of \$3.8bn during quarter, versus an income of \$374mn a year earlier.